What is a spendthrift trust? The Nebraska Supreme Court says it is a trust that restrains both a voluntary or involuntary transfer of a beneficiary’s interest. That means that the beneficiary can’t sell it or give it away nor can his creditors or predators reach it.
One thing to appreciate about trusts is that a court will enforce the provisions of that document according to your written wishes. Your survivors and beneficiaries can’t change the terms of a trust if the proposed change violates a material purpose of the trust. If the purposes of the trust are lawful, not contrary to public policy and are for the benefit of the its beneficiaries, a court will enforce the language of the trust.
In a recent Nebraska case, Mom and Dad had a revocable trust. Dad died first. Upon his death, an irrevocable trust was created for Dad’s half of the real estate. Dad’s irrevocable trust named his two children as beneficiaries but the real estate was held in a spendthrift trust.
Two years after Dad’s death, Mom and the two children reached a written settlement agreement which changed the trust. It was no longer a spendthrift trust. The children would own the real estate outright. And the son would get more real estate than his sister.
Later Mom changed her mind about the settlement agreement. Son went to court to enforce the settlement agreement. Both the county court and the Supreme Court held that the settlement agreement changed a material provision of Dad’s irrevocable trust. Dad’s written intent was enforced a decade after he passed despite what his children wanted.
As an aside on the topic of public policy, I’m aware of an unpublished Douglas County district court case that struck the provisions of a trust that violated public policy. The trust penalized the beneficiary for getting divorced.
Source: In re Trust Created by McGregor, 308 Neb. 405 (February 12, 2021).